ECB, Digital euro introduction full-scale…Possibility of shaking cash and deposit structure

A prospect has emerged that the Digital Euro, which the European Central Bank (ECB) is promoting, could fundamentally change the way currency is used in the Eurozone. This analysis suggests that it may directly impact not just changes in payment methods, but also the structure of bank deposits.

The ECB recently analyzed the impact of the Central Bank Digital Currency (CBDC), the Digital Euro, on the real economy from multiple angles. According to the report, if the Digital Euro is officially introduced, it is expected to replace up to 50% of the banknotes currently in cash circulation. Additionally, it is predicted that about 30% of existing deposits in the banking system could be converted to Digital Euros.

This change could be a factor that shakes the overall asset structure of the financial system, beyond just the reduction of banknotes. Especially if the Digital Euro becomes widespread, individuals are more likely to directly hold digital currency issued by the central bank rather than depositing money in bank accounts. This leads to concerns that it could affect the liquidity or deposit-based operational methods of commercial banks.

Unlike the United States, which maintains a cautious stance on issuing a digital dollar, Europe is actively pushing for the introduction of the Digital Euro. This is driven by the intention to restrain the influence of dollar-based stablecoins and private cryptocurrencies on the European financial system.

Piero Cipollone, a member of the ECB board, emphasized the necessity of the Digital Euro in January this year, saying, "Even to prevent the proliferation of alternative systems that do not pass through banks, the Digital Euro is needed." His remarks indicate that the Digital Euro is serving as a strategic tool to protect European financial sovereignty, beyond a mere technological transition.

The ECB is currently in the experimental stage for the introduction of the Digital Euro and is preparing to fully issue it within the next few years. As the financial environment rapidly transitions to digital-centricity, the reasons for Europe's proactive movement are becoming increasingly clear.